10 Tips for Taxes & Retirement

Planning for retirement involves more than just saving money—it’s crucial to understand how taxes will impact your future income. 

From tax-deferred accounts to Social Security, there are several key factors that can affect your retirement savings. We’ve compiled 10 essential tips to help you navigate the tax system and maximize your retirement benefits.

Whether you’re just starting to plan for retirement or have already retired, these tips will help you minimize taxes and keep more of your hard-earned money.

1. Take required minimum distributions on time.

You generally must begin taking minimum distributions from your retirement accounts by April 1 of the year following the calendar year you turn 73. These required minimum distributions (RMDs) are subject to taxation, and the IRS requires you to take a minimum amount each year based on your life expectancy and the balance of your account. 

 If you don’t take the required RMD, penalties of up to 25% on the amount that should have been withdrawn may apply. Plan ahead to stay on top of your RMDs and avoid penalties.

2. Make all required estimated tax payments.

Even if taxes aren’t being withheld from your retirement income, you may still need to pay tax on it. Specifically, retirement income, such as withdrawals from IRAs, pensions, or investment accounts, may incur taxes.

One of the most important tax tips for retirees is to make quarterly estimated tax payments to avoid penalties. By proactively managing these payments, you ensure that you are in compliance with tax laws and avoid surprises when it comes time to file

3. Deduct continuing care payments.

If you’re living in a continuing care facility, it’s likely that a portion of the monthly payments include medical expenses that you can deduct. Ask your continuing care facility for a statement that documents which portion of the bill is tax deductible.

You’ll get a tax deduction to the extent those payments plus your other medical expenses exceed 7.5% of your adjusted gross income.

4. Contribute to a 401(k) if you can.

If you work during retirement and have a retirement plan available to you, you should consider contributing if you expect to have lower income upon retirement.

Contributions to traditional 401(k)s are typically tax-deferred, meaning you reduce your taxable income now and only pay taxes when you withdraw the funds later. In addition, most employers offer a match – which is an immediate return on your investment!

Since many retirees are in a lower tax bracket when they stop working, this strategy can help you pay less tax in total on those contributions, while continuing to grow your savings.

Maximizing contributions during this time is a smart way to build financial security.

5. Take Qualified Charitable Distribution (QCDs) from retirement accounts.

One of the best tax breaks for retirees is the tax-free Qualified Charitable Distribution, which was permanently extended.

In 2025, if you are 70^½ or older, you may be able to exclude from income distributions up to $108,000 paid directly to a qualified charity from your IRA account. This opportunity doubles for a married couple to a maximum of $216,000.

This is a significant tax savings for retired taxpayers required to receive distributions from their retirement who have paid off their homes, and no longer have big tax deductions like mortgage interest.

6. Sell your home and downsize.

If you sell your home, even if you’ve accumulated substantial equity, you may not have to pay any tax on your profit.

If you have lived in your home for at least two out of the five years before you sell, your profit of up to $250,000 ($500,000 on a joint tax return) isn’t taxable.

7. Manage Social Security taxation.

You may experience taxes in retirement on your Social Security benefits. Depending on your overall income, your benefits may be subject to federal taxes.

For example, if your combined income exceeds $25,000 for individuals or $32,000 for married couples filing jointly, up to 50% of your benefits may be taxable. Higher income levels can be taxed up to 85%. 

An option to maximize Social Security benefits is to delay claiming them. Benefits can increase as much as 8% each year you delay claiming them up to age 70. If you can afford to delay, this growth could significantly enhance your retirement income over the long term. 

8. Retire in a state without income taxes.

Taxes in retirement can differ from state to state, significantly impacting your retirement budget. Some states have no state income tax, including:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

Retiring in a state with no income tax can help you stretch your retirement savings. 

Additionally, many states don’t tax Social Security benefits, making them even more appealing for retirees seeking to minimize tax burdens. Make sure you research individual state tax laws to choose a retirement location that meets your unique needs. 

9. Time your pension withdrawals.

Strategic timing of your withdrawals can help manage your tax liability in retirement. Consider taking withdrawals from your IRA earlier in retirement, while your pension income is lower. This could help keep you in a lower tax bracket. 

As your pension increases or required minimum distributions (RMDs) begin, delaying additional IRA withdrawals could prevent you from being pushed into a higher tax bracket later.

Planning withdrawals carefully can optimize your retirement income and save you from paying unnecessary taxes.

10. Review your estate plan regularly and consider working with a professional for tax planning.

Tax planning in retirement involves reviewing your estate plan regularly. Keeping your estate plan up to date is vital for ensuring your assets are distributed according to your wishes.

By checking and updating your plan regularly, you can also identify opportunities to minimize estate taxes, such as making gifts to heirs during your lifetime to reduce the size of your taxable estate.

In addition, working with a tax professional can provide retirement tax tips, help you strategize, and give you peace of mind.

TurboTax will help you claim the tax deductions and credits you’re eligible for, whether you’re planning for retirement or you have already retired, so you can keep more money in your pocket.

Set yourself up for success

Taxes and retirement planning  go together when it comes to building a financially stable and stress-free future. By following these tips for retirees, you can minimize your tax burden while maximizing your savings.

Tax planning isn’t just about reducing taxes—it’s about making informed decisions that will help you enjoy your later years. Start planning now to ensure your retirement is as relaxing and financially sound as possible.